NASD clarifies Quattrone charges

Criminal trial against former star banker to begin Sept. 29

By

LuisaBeltran

NEW YORK (CBS.MW) -- The National Association of Securities Dealers has clarified some of the market abuse charges against Frank Quattrone at the former star investment banker's request.

The Quattrone team says the clarification is favorable, while the NASD claims the ruling is a non-issue. Quattrone is contesting the civil charges against him; the clarification comes as a result of those proceedings

The NASD explained that Quattrone is not being charged with failing to directly supervise the technology group of analysts at Credit Suisse First Boston.

"It is part of the public record that the NASD charged Quattrone with flawed supervisory structure and spinning," a spokesman said Monday. "The NASD did not charge Quattrone with faulty or inaccurate research reports."

That means Quattrone is not being charged with specific instances of supervising analysts who produced false or misleading investment research. That research is at the crux of the NASD's complaints.

The Quattrone camp is claiming the development as a win for the former star banker of Credit Suisse First Boston, the banking unit of Credit Suisse Group
CSR, +2.53%

"The absence of any flawed research by itself raises significant questions about the merits of the NASD's case," a Quattrone spokesman said.

In March, the NASD charged Quattrone with "creating and overseeing a flawed organizational structure that undermined research analyst objectivity."

The association also charged Quattrone with failing to cooperate in an NASD investigation of whether he encouraged employees to destroy documents after he was notified of NASD and federal investigations. See full story.

The regulator is now alleging a systemic failure that resulted from the supervisory and organizational structure imposed on the tech group by Quattrone.

"This is a short-term win," said Prof. Larry Soderquist, of Vanderbilt University, who specializes in securities law. "In the long-term, it's still very open."

The NASD is choosing to charge Quattrone very broadly. This may make it easier to prove that things went awry at CSFB because Quattrone wasn't supervising sufficiently, Soderquist said.

The real issue is what evidence the NASD will introduce regarding Quattrone's supervisory responsibilities. "I think he has a long way to go with the NASD," Soderquist said.

In April, Quattrone became the first Wall Street executive to face criminal charges since regulators began investigating the allocation of hot initial public offerings in 2000. He resigned from CSFB on March 4.

Quattrone has maintained his innocence to all charges.

The criminal trial against Quattrone is to begin Sept. 29 in the U.S. District Court for the Southern District of New York. Judge Richard Owen is overseeing the case.

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